IMF issues gloomy forecast for global economy
The International Monetary Fund has downgraded its forecast for the global economy, saying in its latest report compiled for the upcoming G20 summit that the “outlook is gloomier” than previously expected.
The IMF has been gradually slashing its forecast for global growth in 2023 since January, when it anticipated 3.8% growth. In October the fund lowered its projection from July’s posting of 2.9% to 2.7%, saying: “we expect countries accounting for more than one third of global output to contract during part of this year or next.”
Analysts have warned of a 25% probability that downside risks resulting from the Ukraine conflict, along with stubborn inflation, would slow the global economy to less than 2%.
The IMF noted that there has been a steady worsening in recent months for purchasing manager indices (PMI) which track a range of G20 economies.
“The challenges that the global economy is facing are immense and weakening economic indicators point to further challenges ahead,” an economist in the IMF’s research department, Tryggvi Gudmundsson, wrote in a blog post on Sunday.
The cost of living crisis, triggered by spiraling food and fuel inflation, continues to hit consumers worldwide. Price growth has sparked a series of interest rate hikes, making loans more expensive, according to the IMF analysts. They urged policymakers to “continue to prioritize containing inflation” which hurts “vulnerable groups the most.”
“Continued fiscal and monetary tightening is likely needed in many countries to bring down inflation and address debt vulnerabilities and we do expect further tightening in many G20 economies in the months ahead,” Gudmundsson said, stressing that the macroeconomic environment is “unusually uncertain”.
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